The Impact Of Demographic Changes On Investing

I often write about technology and the impact it has on different industries. We are at a time where it is expected that we will see major technological innovations that, over the next decade, changes most of how we operate as a society.

That said, there is another factor that can have a significant impact upon the prospects of a company/industry going forward.

Changes is demographics are having a severe impact on many companies. It is something that is overlooked since it often takes a long time for it to be significant enough to be noticed. However, the individual who is able to key in on it early could realize a huge gain (or avoid a big loss).

I came across this article that reaffirms this point. It was a survey done that questioned peoples religious practices and beliefs. Even though it didn't deal with business per se, we know that churches are businesses. Nevertheless, it does drive the point home.

In the United States, over a 10 year period of time, we see a rather large decline in Protestants and Catholics. At the same time, we see a rise in other belief systems.

Looking at the demographic breakdown, we can see where the problem is. The Silent Generation and Baby Boomers have an overwhelming percentage of their populations that A) identify themselves as Christain and B) attend services.

https://www.pewforum.org/2019/10/17/in-u-s-decline-of-christianity-continues-at-rapid-pace/

These chars basically sum it up.

The Silent Generation is 74 years of age and older. It makes up the largest percentages in these numbers. 84% identify as Christians while 60% show up for service at least a couple times a month.

What do you think these numbers will look like in 10 years? We know that a large percentage of this group will die off over that time. The challenge comes that, in looking at the lower end of the chart, the replacement is not coming.

As someone who sold equipment to churches over the years, I can tell you many are struggling. These numbers do reflect what is taking place out there.

Unfortunately, there are many industries that fit into this same scenario. We see a company such as Harley Davidson suffering as their customer base gets older and starts to die off.

Years ago, the nightly news, post the big three new anchors saw a measured drop in viewership. The reason for this was very simple: as the news watchers (Silent Generation) started to die off, the young generations were receiving their news from elsewhere i.e. the Internet.

In the United States, there are roughly 50M people, 65 or older.

https://www.statista.com/statistics/241488/population-of-the-us-by-sex-and-age/

If this is the demographic for one's product, unless it is healthcare, that company or industry is in trouble. While it is a growing part of the whole, the fact is a large percentage of this group is going to die off over the next decade.

Another point to consider is, for those who are left, money is tight. These people tend to be on fixed incomes, thus are not rushing out to spend. Large purchases tend to be out of their mindset.

How will all of this affect a brand such as Cadillac as an example?

Technology also ties into this in a way few realize. The 55 and older crowd tends to be more technologically averse than the younger ones. This means they are apt to keep systems in place that were used for decades.

The challenge here is many of these people are retiring. I once read, each day, 10,000 baby boomers retire each day in the United States. This means they are being replaced by people from the younger generations. These individuals are more apt to adopt a technological change that alters how aspects of the business are done, thus creating havoc for those industries.

For example, think of the plight of office paper. This was once a booming industry. Over the past decade, paper usage in the work environment dropped by a great amount. This affected the sales of not only paper but also copiers, printers, postage machines, ink, filing cabinets, file folders, and toner.

Take a wild guess which generations would find the most "paper people".

While technology can really affect industries, the change in demographics is also having a major impact. Every business has to make up for lost customers. When, however, those customers are die off in droves and the younger generations operate in a different manner, this could make things very difficult.

Pay attention to the demographics because they can certainly affect a portfolio.

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